The trend of life and annuity reinsurers to move or set up in Bermuda is being spurred on by financial benefits of setting up on the Island and the proven track record of companies who have set up shop here.

But the growing competition in the sector has the potential to affect the bottom line of existing and incoming corporations, according to one of the top analysts of US ratings agency Fitch.

Bradley S. Ellis, Associate Director of Fitch's in Chicago cited Annuity & Life Reassurance Ltd. and Max Re as existing success stories and companies like Scottish Annuity Life who announced it is to re-domicile here this year from Cayman as part of this trend.

In May XL Capital set up XL Capital and Annuity and Hampton Re set up shop in Hamilton in March this year.

He said that the boom comes from the competitive advantages offered to companies that move or open operations in Bermuda - both financial and regulatory and that it was a model that was going to be copied.

"Companies are given to certain advantages by moving to a Bermuda domicile. People say, hey, well, they are doing well, maybe we can mimic that," said Mr. Ellis.

Fitch has just affirmed Annuity & Life Reassurance Ltd.'s 'A' and changed its outlook from stable to positive - and much of the company's success and stability Mr. Ellis attributes to being Bermuda domiciled.

"The company has really exceeded the assumptions given to us when they started the business in 1998. It is always difficult to assess a company when it starts up, to know whether you have got the rating right. But they have exceeded everything.

"And companies like Max Re and Scottish Annuity Life will also benefit from the same setting, and will hope to emulate that success."

He said the number of well-capitalised life and annuity reinsurers have begun operations in Bermuda or are seeking permission to do so.

And he added that this boom in the sector comes from the competitive advantages offered to companies that move to the Island and could continue to grow.

Last week Fitch has affirmed the insurer financial strength rating of Bermuda-based Annuity & Life Reassurance, Ltd. at 'A' and revised the Rating Outlook from Stable to Positive.

Fitch said the continued trend of solid operating performance and an attractive outlook for continued expansion of profitable business opportunities.

But it also said: "The company's rating continues to be supported by Annuity & Life' s conservatively structured investment portfolio, strong, innovative management team, low expense structure and the competitive advantages the company derives from its Bermuda domicile.

"Factors that partially offset these positives include Annuity & Life' s modest size and the potential for a significant increase in competition; a number of well-capitalised competitors have begun operations in Bermuda or are seeking permission to do so."

Mr. Ellis said that Fitch considers Annuity & Life have effectively established itself as a viable player in the life and annuity reinsurance market and its client list currently includes some of the largest and best-known insurers in North America.

He said: "Pricing benefits originating from lean operations and its Bermuda domicile have given it an edge over many of its US-based competitors."

Max Re raised $192 million on the Nasdaq when it floated earlier this month, Scottish Annuity reported an increase of 62 percent in net operating earnings at $3.9 million for the first quarter of the years and Annuity & Life saw net soar by 50 percent to $11.7 million for the first quarter 2001.